Has Apple Embarked On A Pre-Earnings Rally?

Although the S&P 500 index is knocking on the door of all time highs, it's top component Apple Inc. AAPL remains quite some distance from its all time high. That was made on April 28, 2015 at $134.54. Coincidentally, the was day following its 2015 Q2 report .which boasted a $0.23 beat along with nearly a $3B revenue beat. Unfortunately, for Apple shareholders that day when it peaked at $134.54 it retreated to close that day at $130.56 and has spent very little time in the $130 handle ever since. The lowest level it has reached since then was on the day of the August 24 Flash Crash ($92). It revisted that crucial support level on February 11 ($92.39), the same the day as the broad market bottomed, at $92.39. So far, it peak on the rebound off that low was made on April 14 at $112.39. It should be noted it made two other highs, one the day before at $112.34 and one the day after at $112.30, putting in triple top for now. However, this article is not about investing the issue and riding it through its upcoming report. With the fickle finger of Wall Street, that is akin to flat out gambling, In the words of Marketfy Maven and the author of "Create Income With Options Spreads", Nic Chahine, "even if one has the results of the report beforehand, it is nearly impossible to profit from it. " The reason being is that there is no way to interpret how the Street will actually react to report and what forward looking statements a company may have. Instead, this article focus on the trading action one week before its earnings report over its previous four quarters. Keep in mind, this is no fool-proof trading strategy but merely an observation of the price action. As the chart below indicates, there has been substantial rallies in Apple in the week preceding its last four earnings reports. Of course, the .timing of the entry and exit is crucial, but that applies to any short or long-term strategy. As the chart below indicates, no matter what the price action is beforehand, Apple has rallied the week before its last four earnings reports. Report Date Starting Closing Price Range Close Day Of Report Q2 2015 4-28 $127.60 $125.32-.$133.13 $132.65 Q3 2015 7-21 $125.61 $125.04-$132.92 $130.75 Q4 2015 10-27 $113.77 $110.82-$119.23 $114.55 Q1 2016 1-26 $96.66 $93.42-$101.53 $99.99 Of the four examples, the third one would have required an accurate exit strategy to have capitalized on the trading action. It should be noted Apple rallied sharply the day following the report to close at $119.50 and continued on to $123.84 before collapsing. So what does all of this mean six days before Apple's Q2 report on April 25 really mean? For the contrarian, it could mean a buying opportunity. With almost the Street being so negative on the issue regarding iPhone shipments and sales, the bar has been pretty low. And what happens when an issue beat lowered expectations, it rallies. Therefore, nervous shorts that are already taking some heat from its recent rally may be attempting to wiggle out before the report. That coupled with perma Apple bulls that buy no matter may exert some upside pressure on the issue. From a technical perspective, Apple closed at $107.48 (one week before the report) and has put in a double bottom at the $106 area from Tuesday's ($106.23) and Wednesday's sessions ($106.06) that may provide for an exit point if the issue goes into reverse. Also, it has come down from the $112 area to it current price for no real fundamental reason. At this time, Apple is back in the area of the targeted close for this thesis (trading higher by $0,78 at $107.69). Whether or not this strategy will prove to be profitable or not until next Tuesday, it certainly has strong rally in the broad market at its back.